Tuesday, September 27, 2011

I have a new column for SI on a key decision today by U.S. District Judge Jed Rakoff to permit the two most serious claims against Mets owners Fred Wilpon and Saul Katz, who are facing a $1 billion lawsuit over whether they fraudulently earned money through investments with imprisoned Ponzi scheme artist Bernie Madoff. Rakoff dismissed nine of the lawsuit's 11 counts, but refused to dismiss the most damaging counts: that Wilpon and Katz earned $295 million in fictitious profits through investing in a scheme that they knew to be too good to be true -- that is, they knew to be fraudulent -- and that they should return their $700 million principal, as well.

Could Major League Baseball take over the team? Here are my thoughts:

Wilpon and Katz also have to worry about Major League Baseball's interest in the matter. Commissioner Bud Selig has already taken over the Los Angeles Dodgers this season from Frank and Jamie McCourt because of the team's financial woes. The commissioner is armed with several legal weapons -- the best interests of the game clause, which provides Selig with wide discretion to regulate any aspect of the game, including ownership interests; the waiver of recourse clause found in ownership purchase agreements, which nominally prevents owners from suing Major League Baseball; and the historical exemption enjoyed by Major League Baseball under federal antitrust law -- that make it possible for him to wrestle control of privately-owned teams from their owners. Although Selig has a much better relationship with Wilpon than with the McCourts, he cannot ignore the potential fallout of the Mets mired in a $1 billion lawsuit.